Lesley Weidenbener | Gov. Mike Pence makes best pitch for tax cut

Gov. Mike Pence last week made his best argument yet for cutting Indiana's income taxes by 10 percent.

He was talking to reporters in a somewhat unusual on-the-record but no-recorders-allowed conversation about his legislative agenda, saying the state is in the enviable position of having the cash to afford the cut and still spend more on education and other priorities.

Pence has being using that "we can afford it so we should do it" argument for some time. But as he was talking, a more interesting talking point emerged. It's probably best summed up in this quote: "Indiana is in the pole position but other states are not standing still."

Now that's something to talk about.

Pence has argued for months that cutting the individual income tax provides money to small business owners for growth. That's because a majority of businesses are organized in a way that requires them to pass through their profits to owners to be taxed as individuals.

So while Pence's proposed tax cut will mean only a couple hundred dollars for the average Hoosier family, it could mean thousands of dollars for a small business owner, money that might be used to hire workers.

But the argument has not seemed to gain Pence any ground with skeptical lawmakers. The GOP - with supermajorities in the House and Senate - appear to have other priorities on which they can spend the $520 million the tax cut would take out of the state's tax receipts annually.

Now, though, Pence has hit on a point that may be harder to ignore. Other states are taking action - or at least contemplating action - on their income tax rates, moves that could put Indiana at a competitive disadvantage, even in its own backyard.

Republican Ohio Gov. John Kasich is proposing to cut his state's income tax rate by 20 percent and some businesses taxes in half, moves paid for in part by expanding the state's sales tax to cover services as well as goods.

Nebraska, Louisiana, Kansas and North Carolina are also considering tax cuts. In fact, Nebraska Gov. Dave Heineman is pushing lawmakers in his state to eliminate its income tax and its corporate tax completely.

"What our tax reform package is all about is to be more tax competitive to create more jobs and higher-paying careers," Heineman told Stateline.org. "So, it's not just about more jobs. We want to create more jobs that pay $60,000-a-year, $70,000-a-year, $80,000-a-year - middle-class family incomes. To be competitive in today's marketplace both domestically and internationally, I think we've got to have a better tax system than we have."

Louisiana Gov. Bobby Jindal is also looking for a way to eliminate individual and corporate income taxes and lawmakers in North Carolina are considering an elimination of that state's income tax too.

But in most of these cases, state officials are looking for ways to pay for their tax cuts. In Nebraska, the governor is the elimination of some sales tax exemptions. In Louisiana, the governor said he wants his tax cut plan to be "revenue neutral," meaning the state would find other revenue to offset the income tax losses.

In Indiana, Pence doesn't think such offsets are necessary. He said Indiana - with its $2 billion surplus and projections that show the state bringing in more money in the next two years - can cut the state's income tax rate without increases taxes or fees elsewhere.

What that does, of course, is make the state far more dependent on the sales tax, which at 7 percent is one of the highest rates in the nation. House Speaker Brian Bosma, R-Indianapolis, has said that the state's tax system might already be out of balance and that cutting the income tax would likely exacerbate the problem.

Pence said he's unconcerned about that argument. And he's bringing lawmakers into his office for one-on-one meetings where he can pitch his plan - and remind them that even if Indiana does nothing about its tax system, it may be falling behind anyway. That's an argument that's bound to get some attention.

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Lesley Weidenbener | Gov. Mike Pence makes best pitch for tax cut

Gov. Mike Pence last week made his best argument yet for cutting Indiana's income taxes by 10 percent.